As you launch a new product, a single unit cost $22 to make;your suggested retail price is $98; your retailer takes 30% of theretail price; your fixed costs are $1,750,000; your sellingexpenses are $20,000; and, total unit volume sales in yourcompetitive category are 275,000.
What is the contribution margin for each unit sold? (Remember, thesales price is the retail price, less the retailer’s margin.)
A.
67.9%
B.
77.6%
C.
76.0%
Expert Answer
Correct Answer:
A
Working note:
Price received by manufacturer = 98*70% = $68.6
Variable cost per unit = $22
Contribution margin = 68.6-22 = $46.6
Contribution margin % = 46.6/68.6 = 67.9%